Inventories Up 0.2%, Outpacing September Sales

Growth of business inventories outpaced business sales in September, the Commerce Department said Wednesday in a report that analysts said contained a warning of growing backlogs due to the slowing economy.

Commerce reported that inventories held on shelves and back lots climbed 0.2% to a seasonally adjusted $791.8 billion after advancing 0.4% in August.

Business sales, on the other hand, fell 0.3% to a seasonally adjusted $524.6 billion after a 3% gain the previous month.

The business activity produced a slight increase in the inventory-to-sales ratio to 1.51, meaning that it would take 1.51 months to exhaust inventories at the September pace. It was 1.50 in August.

“At the moment, the ratios do not appear excessive,” said Allen Sinai, chief economist for Boston Co. “But they show the first signs of increases related to a declining business climate.”

Robert G. Dederick, chief economist at the Northern Trust Co. in Chicago, agreed that on the surface the report suggests inventories are not yet a problem.

“But there are some warning signals in it of some excess at the consumer level,” he said.

“There’s no inventory problem in the economy,” said economist Stephen Roach of Morgan Stanley & Co. “Inventories are fairly level except for autos.”

A sharp drop in car sales led to a big 2.3% rise in auto inventories during the month.

Although the auto industry has closed plants and laid off some 50,000 workers since January, Detroit has been unable to curtail production fast enough to match the steep drop in sales from last summer’s fast pace.

Auto dealers counted more than two cars in inventory for each one sold in September, according to department figures.

Economists said auto inventories would likely rise further in October and November.